Real property – Equitable proprietary interest – Mistake – Claimant transferring property to defendant in mistaken belief that agreed figure paid – Claimant seeking relief from consequences of mistake – Whether claimant being sole beneficial owner of property – Whether parties being beneficial tenants in common – Claim allowed
A dispute arose between two brothers about the ownership of a valuable flat known as 106 Nottingham Terrace, London NW1. The property was a four-bedroom penthouse apartment opposite Regent’s Park. It had been acquired by the claimant in his sole name in 1972 but was transferred to the defendant by a transfer dated 24 January 2014.
The claimant’s case was that he was the sole owner in equity of the property from the date of acquisition but that, in or about 1990, he orally agreed to transfer the property to his brother for £400,000. He contended that he transferred the property to the defendant in the mistaken belief that the defendant had paid him the agreed figure and sought relief from the consequences of his mistake in equity and other relief.
The defendant argued that the brothers were beneficial tenants in common in equal shares from the outset, despite the conveyance into the sole name of the claimant, pursuant to a common intention constructive trust, and that he was therefore buying out the claimant’s 50% interest. Further, whilst he did not recall the specifics of the arrangement or the agreed price, the defendant said that the claimant would have allocated a sum in one of the accounts of the many jointly owned companies, a director’s loan account, a trust account or similar device so as to account for the movement of a sum of money from the defendant to the claimant to reflect the transfer of the claimant’s beneficial interest in the property to the defendant.
Held: The claim was allowed.
(1) Where there was sole legal ownership, the starting point was that there was also sole beneficial ownership. The onus was upon the person seeking to show that the beneficial ownership was different from the legal ownership. In sole ownership cases, it was upon the non-owner to show that he had any interest at all. The conclusion that equity followed the law could, however, be displaced by showing that the parties had a different common intention when the property was first acquired or that they formed a different common intention at a later date, providing there was detrimental reliance. Displacing common intention might be express or inferred. The relevant intention of each party was the intention which was reasonably understood by the other party to be manifested by that person’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party: Stack v Dowden [2007] 2 AC 432 and Jones v Kernott [2012] 1 AC 776; [2011] PLSCS 264 applied.
(2) Each case turned on its own facts. Factors other than financial contributions might be relevant to divining the parties’ true intentions including: any advice or discussions at the time of the transfer which cast light upon their intentions then; the reasons why the home was acquired in one of their sole names; the purpose for which the home was acquired; the nature of the parties’ relationship; how the purchase was financed, both initially and subsequently; how the parties arranged their finances, whether separately or together or a bit of both; how they discharged the outgoings on the property and their other household expenses. The express or inferred common intention usually would also determine the size of the shares of the co-owners.
The fact that the claimant was content to treat the property as a home for himself and the defendant did not, without more, give rise to a post-acquisition constructive trust in the defendant’s favour. The defendant did not acquire a beneficial interest in the property at the time of acquisition, or subsequently. There was no common intention to share the property beneficially and none should be inferred and there was no detrimental action by the defendant in reliance on any such common intention: O’Neill v Holland [2020] EWCA Civ 1583; [2020] PLSCS 216 considered.
(3) The primary relief sought by the claimant was an order requiring the defendant to transfer legal title to the property back to the claimant. Notwithstanding that the defendant was the sole legal owner of the property, the claimant had, on the evidence, successfully rebutted the presumption that the defendant was also the sole beneficial owner. The claimant was the sole beneficial owner and the defendant held the property on constructive trust for him.
The claimant was entitled not only to personal remedies in unjust enrichment, but also on the facts of this case, proprietary remedies because, by 2018 at the latest, the defendant knew that the claimant was labouring under a mistake with the result that his conscience was thereafter affected. On analysis, a void contract for the sale of land had been partly performed by the claimant but it remained a void contract. The personal obligation to make restitution of the particular assets received under the void contract was rendered proprietary once the defendant was on notice that the assets were not to be treated as the recipient’s own and restitution was in order. On that basis, the defendant held the property on constructive trust for the claimant: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 and Ali v Dinc [2020] EWHC 3055 (Ch); [2021] 2 P&CR 19; [2022] EWCA Civ 34; [2022] PLSCS 14 considered.
(4) This was an appropriate case to grant relief in equity on the basis of the claimant’s mistake in making a voluntary transfer of the property to the defendant, applying the principles in Pitt v Holt [2013] 2 AC 108.
(5) There was no presumption of advancement as between the parties, and no evidence of an intention to make a gift; nor was there any evidence of any intention inconsistent with a trust. Therefore, the defendant held the property on presumed resulting trust. Furthermore, the claimant was entitled, in principle, to an account and inquiry, in particular as to the rental income received by the defendant for the property. Accordingly, there would be judgment for the claimant, a declaration that the claimant was the sole beneficial owner of the property, an order that the defendant transfer the property to the claimant and an order for the taking of an account.
David Holland QC and Evie Barden (instructed by JMW Solicitors LLP) appeared for the claimant; Matthew Winn-Smith (instructed by Trethowans LLP) appeared for the defendant.
Eileen O’Grady, barrister
